Press briefing on national economic performance in H1

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Speakers:
Mr. Mao Shengyong, spokesperson for the National Bureau of Statistics

Chairperson:
Hu Kaihong, spokesperson for the State Council Information Office of China

Date:
July 16, 2018

Nikkei:

You just mentioned that the growth rate of infrastructure investment has fallen faster. What is the reason behind this? Is it related to strengthening financial regulation?

Mao Shengyong:

The growth rate of infrastructure investment in the first half of this year has indeed slowed down. In this regard, we can open up perspectives. First, in past years, China's infrastructure investment ran at a high level, with a growth rate of more than 20 percent being maintained for many years. We can see that infrastructure construction made great progress in various areas. From this perspective, the current demand for infrastructure investment is less intense than in the past.

Second, from the perspective of preventing and resolving major risks, the central government has conducted a comprehensive evaluation of project compliance and rationale, including social and economic benefits, and has strengthened compliance verification for projects, including PPP projects. Through these means, some compliance projects in the second half of the year may accelerate their landing progress. Therefore, fixed asset investment, including infrastructure investment, will continue to be stable in the second half of the year. Thank you!

China News Service: 

Although the NBS has released a statement on the profits of enterprises above the designated size, there are still some doubts about the figures and the statistical methods. Could you give us further explanation? Thank you.

Mao Shengyong:

The NBS has released a statement on its official website about the profits of enterprises above the designated size. Still, I would like to present more details.

First, the statistics of their profits are real and reliable. They also agree with other relevant indicators. The CPC Central Committee and the State Council attach great importance to the quality of statistics. They have issued several important documents guiding statistical work. In accordance with the requirements given in those documents, we have tightened regulations on statistical work, investigated and prosecuted violations of relevant laws, thus improving the reliability of statistics. An important reason why the figures of profits generated by enterprises above the designated size are reliable is that they agree with other relevant indicators.

Second, the calculation of industrial enterprises' profits is scientific. It has been used for two decades consecutively, so it is stable. The statistical range of profits of industrial enterprises above the designated size covers those enterprises whose annual revenue of major business is 20 million yuan or more. We know that if changes take place in some enterprises regarding production and operation, some of them might be upgraded from enterprises below the designated size to above, and vice versa. These enterprises can be either newly registered or those which have registered to close. Therefore, the number of industrial enterprises above the designated size is variable. But it is noteworthy that all enterprises, whether upgraded or downgraded, according to the statistical system, should strictly comply with the check procedure. Over the past year, the number of industrial enterprises has decreased due to strengthened law enforcement of statistics and data review. Meanwhile, how to calculate the profits of industrial enterprises above the designated size? The Statistics Bureau uses a fixed reporting period method; that is to say, if we want to calculate the profits from January to May of this year, the period from January to May will be taken as the base period. The enterprises will be divided into five categories. The first category includes those who have been on the list of enterprises above the designated size both last year and this year. Profits from these enterprises are clearly separated between last year and this year. The second category includes those which have been upgraded from enterprises below the designated size to above, due to their good economic performance. Their profits of the reporting period are those from January to May of this year, while their profits of the base period refer to last year's profits. The profits must be covered when they were below the designated size. Enterprises should submit their profits from both this year and last year, so last year's profits of those upgraded will be calculated as ones above the designated size. The third category includes those which have been downgraded from enterprises above the designated size to below. If an enterprise is downgraded during the reporting period, its profits will not be calculated as those of an enterprise above the designated size, but will be considered as those of below the designated size, whose statistics are conducted through sample surveys. The fourth category includes newly registered enterprises. If their revenue in the first year reached 20 million yuan, their profits are calculated in the reporting period. However, these enterprises do not have base numbers from last year, so their profits in the base period will be zero. The fifth category includes those enterprises which have dissolved or cancelled their registration. Their profits during the reporting period are zero, but their profits in last year must be included in base period. The fixed reporting period method has been used since 1998. It has not changed over the past two decades. The above five categories together can reflect the trend of industrial enterprises' profits in a more precise and objective way. There is no tampering with the growth rate data. 

There is another point I need to stress. Besides the economic factors I just mentioned, there are some other factors that may influence the base period and reporting period of corporate profits in the industrial sector. 

First, law enforcement was strengthened. From 2017 to April 2018, the NBS handled 72 major law violation cases, gave 129 people verbal warnings, and punished 79 people. Local statistics authorities also handled more than 7,000 cases violating statistical laws and regulations. In this process, we treated some law-breaking enterprises and corrected the base figures correspondingly. 

Second, redundant statistical figures concerning enterprises with business in several regions and several sectors were eliminated. It has been increasingly common for enterprises to conduct business in several regions and sectors. When enforcing laws and reviewing statistics, we discovered that some enterprises submitted the figures of their headquarters and local branches repeatedly. For example, we found that an enterprise has 25 subsidiary companies, but the figures submitted from 19 subsidiaries also included the figures of the headquarters, resulting in a repetition rate of 29 percent in some major indexes . From the fourth quarter last year, we eliminated such figures according to the result of our special investigation. 

Third, after introducing the reform of replacing business tax with VAT , some industrial enterprises separated non-industrial business or business in the service sector from their main business because there will be tax incentives. The statistics from taxation authorities show that in the past two years, more than 3.5 million new enterprises in construction, finance, real estate and consumer services sectors were registered. Some of them were the result of business separations. What influence will this have? It will make the profits of industrial enterprises lower than last year. 

We will continue to improve our work, and all comments and suggestions are welcome. Thank you. 

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